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The Moral Hazard of Anti-Terrorism Financing Measures: A Potential to Compromise Civil Societies and National Interests

Radical, fundamentalist Islamic terrorists have targeted civil societies for attack, in the course of which they are using and abusing philanthropic structures and charitable institutions. In the wake of the 9/11 attacks, the global war on terrorism took shape. President George W. Bush issued Executive Order 13,224 in which he declared a national emergency to deal with the threat of future terrorism. Congress responded with a powerful weapon, the USA Patriot Act, that provided measures aimed to detect, prevent, and suppress terrorist financing. The U.N. Security Council unanimously adopted Resolution 1373, and the intergovernmental Financial Action Task Force (F.A.T.F.) released Nine Special Recommendations that have influenced numerous countries across the globe in structuring their responsive anti-terrorism financial regulatory schemes. Although countries reactive regulatory regimes would be intended to serve the extremely important national interest of protecting security within their borders, such legal systems may simultaneously constrain philanthropic aid structures and nongovernmental organizations crucial to healthy civil societies. In so doing, anti-terrorism finance regulatory regimes ironically may compromise essential national interests, including national security. This effect perhaps may be particularly pronounced within some predominantly Muslim countries.

As Islam places a high value on compassion, wealth redistributions, social justice, and supporting and enhancing fellow humans, both philanthropy and charity play crucial roles for Muslims and their civil societies. The flow of such funds is economically essential to, and provides critical building blocks for, Muslim civil societies. By adopting, implementing, and enforcing strict and comprehensive anti-terrorism laws modeled on the F.A.T.F. standards, countries could alter the legal landscape for philanthropic and charitable giving by Muslim-Americans, as well as other Muslims, and effectively cut off financial support for needy Muslims and Muslim civil societies actors. By doing so, the same destabilizing factors that vigorous civil societies work to alleviate relative economic, social and political inequalities within a society, such as structured educational deprivations, lack of civil liberties, and political alienation could be aggravated. Because these are several troubling factors touted as key causes of terrorism, I suggest that their exacerbation could compromise national security interests, as well as other national interests, of the U.S. and other countries around the globe. Such possible costs are high and should not be overlooked as countries are prodded to adopt comprehensive and strict anti-terrorism finance legal regimes. I conclude that now, nearly seven years after the U.S., U.N., F.A.T.F., and some countries around the world adopted anti-terrorism finance strategies in the first reactive wave to the 9/11 tragedies, it may be time to rethink them. Perhaps more nuanced, targeted, and tailored approaches could be developed to mitigate the moral hazard of the current anti-terrorism finance tactics.

Date posted: June 11, 2008
; Last revised: October 9, 2008

Suggested Citation

Crimm, Nina J., The Moral Hazard of Anti-Terrorism Financing Measures: A Potential to Compromise Civil Societies and National Interests. St. John's Legal Studies Research Paper No. 08-0139; Wake Forest Law Review, Vol. 43, 2008; Islamic Law and Law of the Muslim World Paper No. 08-32. Available at SSRN: http://ssrn.com/abstract=1142916